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Reducing Costs and Improving
Quality
Lauren Rowley, VP State Affairs
National Conference of State Legislatures
May 18, 2018
Pharmacy Benefit
Managers (PBMs)
Overview
• What is the problem?
• What is a PBM?
• What role do PBMs play?
• What added value to PBMs provide the healthcare
system?
What is a PBM?
• A pharmacy benefits manager (PBM) is a health care
company that contracts with insurers, employers,
unions and government programs to administer the
prescription drug portion of the health care benefit.
• PBMs work with their clients to perform a variety of
services to ensure the delivery of high-quality, cost
efficient drugs to consumers.
• With more than 266 million Americans receiving
pharmacy benefits through a PBM, they are able to
aggregate this buying clout to help plan sponsors and
individuals lower their prescription drug costs.
35.7%Self-Insured Employers
31.6%Commercial Health Plans
18.0%Medicaid*
14.7%Medicare Part D
More than 266 million Americans receive pharmacy
benefits provided through PBMs
PBMs’ National Footprint
266MILLIONAMERICANS
*Excludes Medicare-Medicaid Dual Eligibles where drugs are covered by Medicare Part D.
Source: Visante estimates prepared for PCMA, 2016.
• PBMs tailor drug benefit models based on the plan
sponsor’s specific needs and budgetary constraints
through a competitive bidding process.
• There is no one-size-fits-all model and the plan sponsor,
or PBM client, always has the final say when designing
their drug benefit plan.
• In addition to holding down the cost of drugs, PBMs also
employ a variety of tools that are proven at driving
adherence, increasing quality, and improving patient
outcomes.
What Role Do PBMs Play?
Pharmacy Benefit Management Services
Pharmacy
Networks
Claims
Processing
Price, Discount and
Rebate Negotiations
with Pharmaceutical
Manufacturers and
Drugstores
Formulary
Management
Mail-service
Pharmacy
Specialty
Pharmacy
Drug Utilization
Review
Disease
Management and
Adherence
Initiatives
• Patient cost-sharing often represents only a small fraction
of the total cost of the drug.
• Brand drug manufacturers establish set the list price on
pharmaceuticals.
• Until other drugs are approved for the same disease or
condition, manufacturers have little incentive to reduce
their prices.
• Health plans and PBMs do not have any control over
the price the manufacturer sets for a drug — but PBMs
have tools to lower drug costs.
Tackling High Drug Costs
PBM Prescription Drug Savings
• A recent study published in 2017 shows PBMs:
– Save $941 per patient per year
– Reduce drug costs for patients by up to 50% compared to
what they would have spent without a PBM.
– For every $1 spent on PBM services, costs to employers
and other plan sponsors are reduced $6.
*Comparison based on non-specialty brands. PBM = Pharmacy Benefit Manager.
Source: PCMA based on Visante analysis. (2017).
PBM saves patients and plans
$123
per prescription
PBMs Save Patients and Plans $123 Per Rx
Manufacturer
Wholesaler
Pharmacy
PBM
Without PBM With PBM
$60
$328
$18
$3
$235
$12
$3
8.6%
11.0%
3.2%
0.4%
-7.8%
2.0%
BrandInflation
GenericInflation
Utilization UnmanagedTrend
PBMManagement
CVS HealthTrend
Trend Summary — Commercial Clients
Drug Trend Reports: PBM Savings
Example 1: Drug trend declined from 5.0% in 2015 to 3.2% in 2016, for CVS Health
commercial PBM clients. Per-member-per-month out-of-pocket costs also dropped 3%.
Trend Drivers Trend Reducer
Source: CVS Health, Insights: Executive Briefing. (March 2017).
-5.4%
5.2%
-0.2%
Drug Trend Reports: PBM Savings
Drug
Category
% of
Spend Trend
Unit
Cost
Autoimmune 14.0% 23.1% $4,785
HIV 5.6% 22.0% $1,814
Cancer (oral) 5.3% 19.3% $8,594
Example 2: Prime’s commercial clients experienced an overall decrease
in prescription drug expenditures in 2017 despite ongoing price inflation
in some of the most expensive drug categories.
Double-digit trends continue
in the most expensive categories
High-cost categories exert
upward pressure on overall trend
25% of pharmacy spend
Autoimmune,
HIV, Cancer (oral)
(25% of
pharmacy spend)
Offsetting cost relief
from PBM management
Overall
trend
Source: Prime Therapeutics, Focus on Trend: Commercial. (Spring 2018).
Patients Should Always Pay the Lowest
Price at the Counter
MythPBMs support “gag clauses,” which prohibit pharmacists from sharing
the lowest price with patients
FactPBMs support the patient always paying the lowest cost at the
pharmacy counter, whether it's the cash price or the co-pay. This is
standard industry practice in both Medicaid and the commercial sector.
PBMs oppose contracting that prohibits drugstores from sharing with
patients the cash price they charge for each drug. These rates are set
entirely at the discretion of each pharmacy and can vary significantly
from drugstore to drugstore. Fortunately, to the degree this issue was
ever rooted in more than anecdotal information, it has been addressed
in the marketplace.
Improving Quality and Patient Outcomes
• PBMs utilize a number of tools that reduce medication errors and increase
patient safety.
• 40% of patients use more than one pharmacy. PBMs are uniquely positioned
with comprehensive information to monitor drug-drug interactions and alert
pharmacies of any possible side effects.
• One study shows that over the next 10 years, PBMs will pPrevent 1 BILLION
medication errors.
• The same study shows that annually PBMs improve adherence and drug
therapy in the diabetic population to prevent:
➢ 480,000 heart failures
➢ 230,000 incidents of kidney disease
➢ 180,000 strokes
➢ 8,000 amputations
Source: Visante: The Reuturn on Investment on PBM Services (2016)
Conclusion
• PBMs play a unique and central role in driving
adherence, holding down costs, and increasing
quality.
• It is crucially important to preserve the ability of PBMs
to use their full range of cost-saving tools, including
networks, utilization management, and formulary
management.
• PBM tools deliver savings for plan sponsors and
consumers, underscoring the success of the
competitive marketplace.